Presentation to the City of Los Angeles Treasurer on the City's - PowerPoint PPT Presentation

Presentation to the City of Los Angeles Treasurer on the City's General Pool Investments September 30, 2018

September 30, 2018 Data Source: Bloomberg Economic Update: Overall Economy * Real Rate (Inflation Adjusted) Percent -3 -2 -1 0 1 2 3 4 5 6 Q4 2010 2.0 Q1 2011 -1.0 Q2 2011 2.9 Q3 2011 -0.1 U.S. GDP (Quarter over Quarter Annualized)* Q4 2011 4.7 Q1 2012 3.2 Q2 2012 1.7 Q3 2012 0.5 Q4 2012 0.5 Q1 2013 3.6 Q2 2013 0.5 Q3 2013 3.2 Q4 2013 3.2 Q1 2014 -1.0 Q2 2014 5.1 Q3 2014 4.9 Q4 2014 1.9 Q1 2015 3.3 Q2 2015 3.3 Q3 2015 1.0 Q4 2015 0.4 Q1 2016 1.5 Q2 2016 2.3 Q3 2016 1.9 Q4 2016 1.8 Q1 2017 1.8 Q2 2017 3.0 Q3 2017 2.8 Q4 2017 2.3 Q1 2018 2.2 Estimate: Bloomberg's Survey of Economists Q2 2018 4.2 Q3 2018 3.0 Q4 2018 2.8 Q1 2019 2.5 As of: 9/30/18 Q2 2019 2.5 2

Economic Update: Employment Unemployment Rates Monthly Non-Farm Payrolls California 9 400 LA Area U.S.A 350 8 300 7 250 Thousands Percent 200 6 150 5 100 4 50 0 3 Jun-14 Dec-14 Dec-15 Dec-16 Sep-17 Dec-17 Mar-14 Sep-14 Mar-15 Jun-15 Sep-15 Mar-16 Jun-16 Sep-16 Mar-17 Jun-17 Mar-18 Jun-18 Sep-18 Mar-14 Dec-14 Mar-15 Dec-15 Mar-16 Dec-16 Mar-17 Dec-17 Mar-18 Jun-14 Sep-14 Jun-15 Sep-15 Jun-16 Sep-16 Jun-17 Sep-17 Jun-18 Sep-18 *Los Angeles area unemployment is not seasonally adjusted. 12 Month Average Monthly Job Change: 211,417 Data Source: Bloomberg September 30, 2018 3

Economic Update: Consumer Activity U.S. Retail Sales* YOY % Change Total Monthly U.S. Retail Sales $520 4.50 $510 4.00 $500 3.50 $490 3.00 $480 Percent 2.50 Billions $470 2.00 $460 1.50 $450 1.00 $440 0.50 $430 0.00 $420 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Mar-14 Dec-14 Mar-15 Dec-15 Mar-16 Jun-16 Dec-16 Mar-17 Dec-17 Mar-18 Jun-14 Sep-14 Jun-15 Sep-15 Sep-16 Jun-17 Sep-17 Jun-18 Sep-18 *Inflation Adjusted Data Source: Bloomberg September 30, 2018 4

Economic Update: Inflation Sector YOY % Price Changes CPI and CPIX* YOY % Change 3.5 4.5 Energy 3.0 3.3 Shelter 2.5 2.8 Wages 2.0 2.6 Services Percent 1.5 2.5 Education 2.3 1.0 CPI 1.3 0.5 Food CPI CPIX 0.0 0.0 Communication -1.0 Apparel -0.5 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 -2 0 2 4 6 Percent *CPIX: Consumer Price Index, excluding food and energy Data Source: Bloomberg September 30, 2018 5

Economic Update: Dollar and Commodities Gold and Oil Dollar Index 106 $2,000 $120 104 Gold $110 102 $1,800 100 Oil $100 98 96 $1,600 $90 94 Gold-Per Ounce Oil-Per Barrel 92 $80 Index Value $1,400 90 88 $70 86 $1,200 $60 84 82 $50 $1,000 80 78 $40 76 $800 74 $30 72 70 $600 $20 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Data Source: Bloomberg September 30, 2018 6

Economic Update: Sector Returns YTD 9/30/18 As of: 20 16.8 15.7 15 11.7 10.4 10 7.0 5 3.7 Percent 1.2 0.6 0.5 0.4 0.2 0 -0.9 -1.7 -2.3 -2.7 -2.8 -3.4 -5 -5.1 -5.9 -7.0 -8.9 -10 -15 Data Source: Bloomberg September 30, 2018 7

Economic Update: S&P 500 Returns 9/30/18 As of: YTD S&P 500 Major Sector Returns 25 19.8 20 19.0 16.4 15 13.1 Percent 10 7.0 4.9 5 2.5 0.0 0 -3.3 -3.0 -5 Data Source: Bloomberg September 30, 2018 8

Economic Update: Yield Curve FYTD U.S. Treasury Yield Curve 3.3 Maturity 6/29/18 9/28/18 Change 3.1 3M 1.92 2.20 0.28 2.9 6M 2.11 2.37 0.26 2.7 1Y 2.31 2.57 0.25 Percent 2Y 2.53 2.82 0.29 2.5 3Y 2.62 2.88 0.26 2.3 6/29/18 5Y 2.74 2.95 0.22 2.1 9/28/18 10Y 2.86 3.06 0.20 1.9 30Y 2.99 3.21 0.22 1.7 3M6M 1Y 2Y 3Y 5Y 10Y 30Y Data Source: Bloomberg Figures may not total due to rounding September 30, 2018 9

Economic Update: Interest Rates U.S. Treasury Yields: 2Y and 5Y U.S. Treasury Yields: 3M and 1Y 3.00 1Y 3.25 3.00 3M 2.50 2.75 2.50 2.00 2.25 2.00 1.50 Percent Percent 1.75 1.50 1.00 1.25 1.00 0.50 0.75 5Y 0.50 0.00 2Y 0.25 -0.50 0.00 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Mar-16 Mar-17 Mar-18 Sep-15 Nov-15 Jan-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 May-18 Jul-18 Sep-18 Data Source: Bloomberg September 30, 2018 10

Economic Update: Agency and Corporate Spreads Spread*: 1-5 Yr Corporate vs Treasury Spread*: 1-5 Yr Agency vs Treasury 16 175 14 150 12 Basis Point Spread 125 Basis Point Spread 10 8 100 6 6 75 4 50 53 2 25 0 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 *BofA/Merrill Index (option adjusted spread vs. Treasury) *BofA/Merrill Index (option adjusted spread vs. Treasury) Agency (GVP0) Corporate A-AAA (CV10) Data Source: Bloomberg September 30, 2018 11

Summary Portfolio Characteristics Core Los Angeles Reserve Total General Los Angeles Core Benchmark * Reserve Benchmark # Portfolio Market Value $2,480,031,506 -- $6,626,311,484 -- $9,106,342,990 Book Value $2,489,853,401 -- $6,787,187,712 -- $9,277,041,113 Variance ($9,821,895) -- ($160,876,228) -- ($170,698,123) Mkt Value % of Total 27.2% -- 72.8% -- 100% Average Maturity (Yrs)** 0.38 0.24 2.77 2.78 2.12 Effective Duration** 0.39 0.23 2.64 2.62 2.03 Weighted Purchase Yield## 1.71% -- 1.94% -- 1.88% *Core Benchmark: 3 Month T-Bill (G0O1 ICE BofAML Index) #Reserve Benchmark: 1-5 Year Govt/Corp A-AAA (BU10 ICE BofAML Index) **Average Maturity after rebalancing for the indexes--Portfolios based upon trade date holdings, Core Average Maturity includes checking ## Weighted Purchase Yield for Core does not include checking September 30, 2018 12

Total General Portfolio: Maturity Distribution 30% 25% 20% 9/30/18 15% 8/31/18 10% 5% 0% 0-.25 .25 to .5 .5 to 1 1 to 2 2 to 3 3 to 4 4 to 5+ Years 0-.25 .25 to .5 .5 to 1 1 to 2 2 to 3 3 to 4 4 to 5+ 9/30/18 12.9% 4.9% 9.5% 24.0% 19.9% 15.0% 13.8% 8/31/18 12.8% 4.1% 9.8% 24.1% 20.4% 15.3% 13.4% Variance 0.1% 0.7% -0.3% -0.1% -0.5% -0.3% 0.4% September 30, 2018 13

September 30, 2018 *Calculated using par values, includes checking Total General Portfolio: Maturity Distribution by Month Millions 100 200 300 400 500 600 700 800 900 0 Oct-18 830 Nov-18 137 Dec-18 205 Jan-19 85 Feb-19 190 Mar-19 170 Apr-19 105 May-19 165 Jun-19 185 Jul-19 110 Aug-19 172 Sep-19 135 Oct-19 182 Nov-19 160 Dec-19 169 Jan-20 180 Feb-20 150 Combined Maturity Distribution* Mar-20 245 Apr-20 135 May-20 186 Jun-20 321 Jul-20 185 Aug-20 140 Sep-20 170 Oct-20 115 Nov-20 157 Dec-20 140 Month Jan-21 170 Feb-21 270 Mar-21 120 Apr-21 170 May-21 151 Jun-21 142 Jul-21 125 Aug-21 200 Sep-21 100 Oct-21 110 Nov-21 200 Dec-21 72 Jan-22 192 Feb-22 165 Mar-22 100 Apr-22 170 May-22 160 Jun-22 86 Jul-22 70 Aug-22 60 Sep-22 25 Oct-22 75 Nov-22 105 Dec-22 60 Jan-23 105 Feb-23 175 Mar-23 85 Apr-23 165 May-23 120 Jun-23 70 Jul-23 125 Aug-23 160 Sep-23 35 Oct-23 0 14

Sector Allocations: Total General Portfolio September 30, 2018 Sector 9/30/18 8/31/18 Variance Bank Dep 1.0% Bank Deposits 1.0% 1.0% 0.0% CDARS 0.0% 0.0% 0.0% CP 7.9% Commercial Paper 7.9% 8.6% -0.7% CORP Corporate Notes 15.8% 15.9% -0.2% 15.8% MMF ABS 1.3% 1.2% 0.0% 0.1% MMFs 0.1% 0.1% 0.0% ABS Agy 1.3% 8.8% Tsy Negotiable CDs 0.0% 0.0% 0.0% 65.3% Agencies* 8.8% 8.9% -0.1% Treasuries 65.3% 64.3% 1.0% Total 100.0% 100.0% *Includes Supranational and Municipal Securities Figures may not total due to rounding September 30, 2018 15

Sector Allocations: Core Portfolio Core Portfolio September 30, 2018 Sector 9/30/18 8/31/18 Variance Bank Deposits 3.6% 3.8% -0.2% CDARS 0.0% 0.0% 0.0% Bank Dep Commercial Paper 28.9% 32.1% -3.3% 3.6% Tsy 47.5% Corporate Notes 10.8% 10.3% 0.5% MMFs 0.2% 0.2% 0.0% Negotiable CDs 0.0% 0.0% 0.0% CP 28.9% Agencies* 9.0% 9.5% -0.5% Agy 9.0% Treasuries 47.5% 44.0% 3.5% Corp 10.8% Total 100.0% 100.0% MMF 0.2% *Includes Supranational and Municipal Securities Figures may not total due to rounding September 30, 2018 16